Services marketing is a specialized branch of marketing which emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods.
Services marketing typically refers to both business to consumer (B2C) and business-to-business (B2B) services, and includes the marketing of services such as telecommunications services, transportation and distribution services, all types of hospitality, tourism leisure and entertainment services, car rental services, health care services, professional services and trade services. Service marketers often use an expanded marketing mix which consists of the seven Ps: product, price, place, promotion, people, physical evidence and process. A contemporary approach, known as service-dominant logic, argues that the demarcation between products and services that persisted throughout the 20th century was artificial and has obscured the fact that everyone sells service. The S-D logic approach is changing the way that marketers understand value-creation and is changing concepts of the consumer's role in service delivery processes.
Definitions
The American Marketing Association defines service marketing as an organizational function and a set of processes for identifying or creating, communicating, and delivering value to customers and for managing customer relationship in a way that benefit the organization and stake-holders. Services are (usually) intangible economic activities offered by one party to another. Often time-based, services performed bring about desired results to recipients, objects, or other assets for which purchasers have responsibility. In exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.Christopher Lovelock and Jochen Wirtz (2011), Services Marketing: People, Technology, Strategy, 7th ed., Upper Saddle River, New Jersey, Prentice Hall
A service encounter can be defined as the duration in which a customer interacts with a service. The customer's interactions with a service provider typically involve face-to-face contact with service personnel, in addition to interactions with the physical elements of the service environment including the facilities and equipment.Furnham, A.and Milner, R., "The Impact of Mood on Customer Behavior: Staff Mood and Environmental Factors", Journal of Retail and Consumer Services, Vo. 20, 2013, p. 634
Concepts of service
Scholars have long debated the nature of services. Some of the earliest attempts to define services focused on what makes them different from goods. Late-eighteenth and early-nineteenth century definitions highlighted the nature of ownership and wealth creation. Classical economists contended that goods were objects of value over which ownership rights could be established and exchanged. Ownership implied possession of a tangible object that had been acquired through purchase, barter or gift from the producer or previous owner and was legally identifiable as the property of the current owner. In contrast, when services were purchased, no title to goods changed hands.
Historical perspectives
Adam Smith's seminal work, The Wealth of Nations (1776), distinguished between the outputs of what he termed "productive" and "unproductive" labor. The former, he stated, produced goods that could be stored after production and subsequently exchanged for money or other items of value. But unproductive labor, however "honourable, ...useful, or... necessary" created services that perished at the time of production and therefore didn't contribute to wealth.
French economist Jean-Baptiste Say argued that production and consumption were inseparable in services, coining the term "immaterial products" to describe them.Smith, A., The Wealth of Nations,1776 In the 1920s, Alfred Marshall was still using the idea that services "are immaterial products."Marshall, A., Principles of Economics, 8th edition (1920), Macmillan, London
In the mid nineteenth century John Stuart Mill wrote that services are "utilities not fixed or embodied in any object, but consisting of a mere service rendered ...without leaving a permanent acquisition."Mill, J.S., Principles of a Political Economy, 1852 vol. 1, J.W. Parker, London, 1852
Contemporary perspectives
When services marketing emerged as a separate sub-branch within the marketing discipline in the early 1980s, it was largely a protest against the dominance of prevailing product-centric view.Gummesson, E., "Implementing the Marketing Concept: From Service and Values to Lean Consumption", Marketing Theory, [Invited Commentary], vol. 6, no. 3, 2006, pp 291–293Schembri, S., "Rationalizing Service Logic, or Understanding Services as Experience?" Marketing Theory, vol 6, no. 3, 2006, pp 381–392. In 1960, the US economy changed forever. In that year, for the first time in a major trading nation, more people were employed in the service sector than in manufacturing industries.Bell, D., The Coming of a Post-Industrial Economy, (1973), Basic Books, 1999 Other developed nations soon followed by shifting to a service based economy.Jones, B., Sleepers Wake! Technology and the Future of Work, Oxford University Press, 1996 Scholars soon began to recognise that services were important in their own right, rather than as some residual category left over after goods were taken into account. This recognition triggered a change in the way services were defined. By the mid twentieth century, scholars began defining services in terms of their own unique characteristics, rather than by comparison with products.Berry, L.L. and Parasuraman, A., "Building a New Academic Field: The Case of Services Marketing", Journal of Retailing, Vol. 69, no. 1, 993, pp 13-60 The following set of definitions shows how scholars were grappling with the distinctive aspects of service products and developing new definitions of service.Furrer, O. and Sollberger, P., "The Dynamics and Evolution of the Service Marketing Literature: 1993–2003", Service Business, vol. 1, no. 2, 2006, pp 93-117Fisk., R. and Grove, S.J., "The Evolution of Services: Building a Multi-disciplinary Field" , [unpublished manuscript], 2007
"Goods are produced: services are performed." (Rathmell, 1966) Rathmell, J.M., "What is Meant By Services?" Journal of Marketing, October, 1966 "A service is an activity or a series of activities which take place in interactions with a contact person or a physical machine and which provides consumer satisfaction." (Lehtinen, 1983Lehtinen, U., "On Defining Service", Proceedings of the X111th Annual Conference of the European Marketing Academy, Bruekelen, 1983 "The heart of the service product is the experience of the consumer which takes place in real time... it is the interactive process itself that creates the benefits desired by the consumer." (Bateson, 1992) Bateson, J., Managing Services Marketing, Dryden, Fort Worth, 1992 "Services are deeds, processes and performances." (Zeithmal and Bitner, 1996) Zeithaml, V. and Bitner, M.J., Services Marketing, International ed., Mc Graw-Hill, N.Y. 1996 "Services are processes (economic activities) that provide time, place, form, problem-solving or experiential value to the recipient." (Lovelock, 2007) Lovelock, C., Patterson, P.G. and Walker, R.H., Services Marketing: An Asia-Pacific Perspective, Pearson Education Australia, French's Forest, NSW, 2007 "The term 'service'... is synonymous with value. A supplier has a value proposition, but value actualization takes place during the customer's usage and consumption process." (Gummesson, 2008) Gummesson, E., "Exit Services Marketing- Enter Service" in Michael Baker and Susan Hart (editors), The Marketing Book, 6th edition, Butterworth-Heinemann, 2008, pp 451-471
Alternative view A recently proposed alternative view is that services involve a form of rental through which customers can obtain benefits.Lovelock, C. and Gummesson, E., "Whither Services Marketing?: In Search of a New Paradigm and Fresh Perspectives", Journal of Service Research, vol 7, no. 1, 2004, pp 20-41 Customers are willing to pay for aspirational experiences and solutions that add value to their lifestyle. The term, rent, can be used as a general term to describe payment made for use of something or access to skills and expertise, facilities or networks (usually for a defined period of time), instead of buying it outright (which is not even possible in many instances).Lovelock, C. and Wirtz, J., Services Marketing: People, Technology, Strategy, p. 14, 7th ed., Upper Saddle River, New Jersey, Prentice Hall. 2011
There are five broad categories within the non-ownership framework Rented goods services: These services enable customers to obtain the temporary right to use a physical good that they prefer not to own (e.g. boats, costumes) Defined space and place rentals: These services obtain use of a defined portion of a larger space in a building, vehicle or other area which can be an end in its own right (e.g. storage container in a warehouse) or simply a means to an end (e.g. table in a restaurant, seat in an aircraft) Labor and expertise rental: People are hired to perform work that customers either choose not to do for themselves (e.g. cleaning the house) or are unable to do due to the lack of expertise, tools and skills (e.g. car repairs, surgery) Access to shared physical environments: These environments can be indoors or outdoors where customers rent the right to share the use of the environment (e.g. museums, theme parks, gyms, golf courses). Access to and usage of systems and networks: Customers rent the right to participate in a specified network such as telecommunications, utilities, banking or insurance, with different fees for varying levels of access
Characteristics
Throughout the 1980s and 1990s, the so-called unique characteristics of services dominated much of the literature.
The four most commonly cited characteristics of services are:Zeithaml, V.A, Parasuraman, A. and Berry, L.L., "Problems and Strategies in Services Marketing", Journal of Marketing, Vol. 49, No. 2, 1985, pp. 33-46 Intangibility – services lack physical form; they do not interact with any of our senses in a conventional way, they cannot be touched or held. Implications of intangibility: Ownership cannot be transferred, value derives from consumption or experience, quality is difficult to evaluate prior to consumption or purchase.
Inseparability – production and consumption cannot be separated (compared with goods where production and consumption are entirely discrete processes) Implications of inseparability: Services are typically high contact systems and are labour-intensive; fewer opportunities to transact business at arm's length, fewer opportunities to substitute capital for labour; subject to human error.
Perishability – service performances are ephemeral; unlike physical goods, services cannot be stored or inventoried. Implications of perishability: Demand is subject to wide fluctuations, no inventory to serve as a buffer between supply and demand; unused capacity cannot be reserved; high opportunity cost of idle capacity.
Variability (also known as heterogeneity) – services involve processes delivered by service personnel and subject to human variation, customers often seek highly customized solutions, services are inherently variable in quality and substance. Implications of variability: Service quality is difficult to manage; fewer opportunities to standardize service delivery.